Up in the air - again

It has been an almost never ending story ever since the Italian government started looking around for a buyer to bail out the country’s troubled state airline, Alitalia.

But it looks as though the end is in sight – yet again. How often those words have been said in recent months does not bear repeating. Unhappily it’s unlikely to be the outcome Rome would have wished for.

That’s because Air France-KLM has abandoned its plans to takeover the airline.

Talks collapsed on Wednesday when Air France boss, Jean-Cyril Spinetta, walked away from the negotiating table after discovering that Alitalia’s unions were trying to seal a deal with an Italian company instead.

The French-Dutch group’s offer of €139 million would have meant the loss of 2,100 jobs, the phasing out of Alitalia’s cargo service and part of its maintenance facilities – all of which would have needed the approval of the unions.

When they refused to budge, Spinetta threw in the towel saying that the impasse was regrettable especially as far as he (and many others) were concerned, as the takeover represented the only long-term chance for the airline’s survival.

Alitalia has a debt of around €1.2 billion, loses more than €1 million a day and hasn’t notched up an annual profit since 2002. Just to add to the woes, the company also has a fleet of ageing, gas-guzzling aircraft and a 20,000 plus workforce that seems to spend just as much time on the ground striking as it does in the air flying

The Italian government had been looking around for a potential buyer for its 49.9 per cent stake in the company for more than a year until it finally agreed to the Air France offer.

Before the talks collapsed, the Italian economics minister, Tommaso Padoa-Schioppa, had said that the Air France deal was the only lifeline for Alitalia. He had warned beforehand that if the planned purchase failed the only alternative would be to put the airline into emergency administration, with the likely outcome that any restructuring would be even more painful than the consequences of an Air France takeover.

The double whammy was completed on Wednesday when Maurizio Prato resigned. He was the chairman of Alitalia and the man Rome had charged with finding a buyer.

The whole mess leaves the airline even closer to the brink of bankruptcy less than two weeks ahead of parliamentary elections and its shares have been suspended.

One of the principle opponents of the government's sale of Alitalia (to a non-Italian company) has been prime ministerial candidate Silvio Berlusconi.

He and the unions could now well get their wish, with Alitalia indeed not falling into foreign ownership - but instead going under completely.